CAD
While labour market data from the US should be the main focus for traders this afternoon, the counterpart Canadian report should not be overlooked. We expect to see a sharp contrast between the North American neighbours, supportive of further USDCAD upside. That said, a word of warning here too. Both sets of data are due simultaneously, and the typical market bias has seen price action dominated by the fallout from US data first over recent months, with the impact of Canadian readings only feeding through later. With this in mind, we would not be at all surprised to see USDCAD initially fall this afternoon if our expectations for NFPs are met, before rallying later or even early next week on soft Canadian readings.
USD
While the focus for much of the week has been on Europe, today, it is events on the other side of the Atlantic that should be front of mind for FX markets. This afternoon’s jobs report is pivotal as we see it, both for the prospects of a December rate cut from the FOMC, and for the dollar’s fortunes into year-end. Markets are looking for a 220k NFP print, with the unemployment rate expected to remain at 4.1%. In contrast, we anticipate an upside payrolls beat, with the labour market playing catch up after hurricane and strike disrupted October saw the NFP figure dip to just 12k last month. If we are right, then traders should spend this afternoon paring back Fed easing bets, in line with our base case that looks for a policy hold this month, leaving the greenback set to end the week on the front foot, with only CPI data next week left as a tier data release ahead of the FOMC decision on December 18th.
EUR
Despite French PM Barnier’s resignation, along with the rest of his government, EURUSD still made headway on Thursday, climbing 0.75%. To us, this looks bizarre. We think markets are yet to grasp just how serious the downside political risks facing both the French economy are, and the broader eurozone too. That said, if our expectations for US payrolls are correct, then EURUSD should revert lower later today – which should leave the pair trading at more sensible levels.
GBP
A quiet end to the week from a UK perspective should leave sterling traders focused on North America this afternoon. That said, despite the pound having benefited from a general lack of domestic catalysts in recent days, we think this is set to change. Cable is starting to look a little rich at current levels having ground higher this week. A nonfarms beat this afternoon should help reverse that trend.
This content was originally published by our partners at Monex Canada.